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CA Intermediate · Cost and Management Accounting · Joint Products and By Products

Under ICAI cost accounting treatment, when a by-product has a small value and its sale proceeds are credited to the profit and loss account as other income, the main effect on the cost of the main product is that:

The cost of the main product is unaffected. When by-product sales are credited to the profit and loss account as other income, nothing is deducted from the main product's cost, so its cost remains as computed and the by-product income only increases overall profit.

  1. ACost of the main product is reduced by the by-product sales
  2. BCost of the main product is unaffected by the by-product incomeCorrect
  3. CCost of the main product is increased by by-product handling cost only
  4. DBy-product is treated as a joint product and gets joint cost

Explanation

When by-product income is taken to the profit and loss account as other income, it is not deducted from the cost of the main product, so the main product cost remains unchanged. The income appears separately in profit. Crediting to the cost of production is a different method.

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